Saudi Arabia stakes its future on tourism and construction

As part of a process of economic diversification, the kingdom is investing in a huge new city alongside Mecca, its spiritual capital. And recent departures from the Trump administration could normalise relations between Washington and Teheran

Saudi Arabia is planning to expand its tourist industry and spend billions of dollars on new construction. The first project is a 2,450-square-kilometre extension of Mecca, announced by Prince Khaled al-Faisal bin Abdulaziz. The satellite city, inspired by similar projects in Dubai and elsewhere in the United Arab Emirates, will be called Al-Faisaliah. It will have a major impact on the region’s infrastructure, and will include an airport, a freight terminal, industrial zones, hospitals, and farms. Riyadh received $110 billion in US military aid when President Trump visited last May, but the Saudis appear to be losing ground to rival Iran since a number of hawks left his administration.

The main purpose of this and other mega-construction projects is to reduce demographic pressure on the country's two biggest cities, Riyadh and Jeddah.

The Saudi project

The main purpose of this and other mega-construction projects is to reduce demographic pressure on the country’s two biggest cities, Riyadh and Jeddah. The prince said that it would provide 995,000 homes for up to 6.5 million people by 2050, and the government also claims it will create up to a million jobs in health, education, technology, services and other sectors. The six-stage project, located to the west of Mecca, will be managed by the Mecca Regional Development Authority, which is about to hold meetings with companies in the private sector to finalise details of the planning and design process. This will be funded by international Islamic finance funds. The satellite city will extend from Mecca to Al-Shuaiba on the Red Sea, with a port authority located between Al-Baidaa and Shumaisi. The plan, which is also inspired by economic diversification projects in Singapore and the Malaysian city of Putrajaya, aims to generate 9.5 gigawatts of renewable energy and introduce high-quality sustainable agriculture. The city will also provide additional accommodation for the millions of pilgrims who visit the holy city each year.

A new relationship with Iran?

While the Saudis invest in tourism, the threat of further sanctions against Iran is receding. The North Korea crisis is damaging relations between the US and countries that support the Pyongyang regime, but for the first time since Trump’s inauguration, détente with Iran is gathering pace. Despite the latest sanctions being approved, the departure of Trump’s strategist Steve Bannon was followed by three leading Republican Iran hawks: Ezra Cohen-Watnick, the National Security Council’s senior director for intelligence on the National Security Council; Derek Harvey, its senior Middle East advisor, and Rich Higgins, a director for strategic planning. Iran’s president Hassan Rohani responded to the additional sanctions by threatening to increase the country’s missile program budget to deal with the United States’ “hostile policies‘, adding that the nuclear program could be up and running again in days. Meanwhile, Iran’s former foreign minister Ebrahim Yazdi died in Izmir, Turkey, aged 86. As the leader of Iran’s freedom movement and a major figure in the 1979 revolution, he was deputy prime minister in the interim government of Mehdi Bazargan. Yazdi was arrested in 1997 and 2009 for his criticisms of the authorities.

A longterm view

Saudi Arabia is undergoing a makeover to attract new investment and tourists. The immense satellite city for Mecca is one of the most important, expected to bring a significant boost to the local economy, and there is also an increasing possibility of reaching a nuclear agreement with rival Iran. Despite the new targeted sanctions approved by Washington, and the prompt response from Teheran, the anti-Iranian front in Congress is losing ground.